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Africa’s Most Valuable Bank Sees Profit Rebound as Payrolls Jump

(Bloomberg) — FirstRand Ltd., Africa’s biggest bank by market value, experienced a better-than-anticipated recovery in the past four months after payrolls recovered to pre-coronavirus levels.



graphical user interface: South African Banks as Nation Endures Longest Recession


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South African Banks as Nation Endures Longest Recession

The improvement resulted in fees and commissions “strongly” rebounding, while the lender said its credit-loss ratio also improved from the 1.91% reported for the six months through June. That led to the stock reversing earlier losses to trade 0.7% higher as of 4:28 p.m. in Johannesburg.

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“Revenue growth for the four months to October 2020 has been more resilient than initial expectations,” FirstRand said in a statement Thursday. “The earnings trend for the four months from July 1, 2020 to Oct. 31, 2020 is reflecting a better than anticipated rebound.”

Adjusted earnings per share in the six months through Dec. 31, the company’s second-half, are expected to decline by between 20% and 25% from the year-earlier period, when it experienced higher growth, the company said. That compares with a 38% drop in the 12 months through June.

While activity levels in many areas of business have returned to pre-Covid levels at FirstRand, the lender and its South African peers face significant uncertainties in the months ahead as the country braces for a potential surge in virus infections. The fortunes of the nation’s large banks are also tied to an economy mired in a recession and rising government debt.



graphical user interface: South African Banks as Nation Endures Longest Recession


© Bloomberg
South African Banks as Nation Endures Longest Recession

South Africa’s Rising Debt Is ‘Major’ Threat to Finance Sector

The group remained cautious on the sustainability of this rebound.

“The long-term impacts of the lockdown are not yet fully known,” FirstRand said. “The South African medium-term budget confirmed the ongoing fiscal and macroeconomic challenges which the group believes will continue to weigh on economic activity and constrain growth.”

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